An example of why some people don't like those auto-pay systems

While this is a stupid error on their part, I have to say that I'm impressed with DreamHost's response. I was affected by this, but they corrected the error before I even noticed it.

Everyone makes mistakes sometimes, and this one was a doozy -- but they admitted their fault and fixed it right away. How many companies will give you your money back so quickly once they've got their hands on it?

Ever tried to get Verizon or Comcast to fix a billing error? Even when they do finally admit they made a mistake (after sitting on hold for hours on multiple calls) they still make you jump through hoops to get a refund.

Hello,

As a previous employee of DreamHost and shift manager of their Graveyard Team I can advise you that billing errors within the company are nothing out of the ordinary, suffice to say I was not very shocked when I read there was a 7.5 million dollar billing error. The DreamHost billing system is far from "robust and stable" as Josh Jones proclaimed on the companies web blog, the only thing that could be counted on is the constant issues that have plagued DreamHost for the past few years. Billing issues are quite common with their company and the "fat fingers" he refers to having have led to countless mishaps causing customers downtime and other costly consequences.

As a matter of fact, I am actually the head of a class action lawsuit "Gerasimatos vs New Dream Network" in regards to DreamHost not abiding by the California Department of Labor regulations for paying employees overtime for working greater than 8 hours daily, and also for illegally deducting vested wages for sick and vacation time. I became a whistle blower on DreamHost and shortly after the DLSE contacted the DreamHost owners I was terminated for "doing the right thing".

Here is the exact letter the DLSE representative sent DreamHost prior to my termination for engaging in protected activities with the DLSE. The law firms participating in the Class Action suit are as follows.

http://www.coviello-law.com/ and http://www.duvel-law.com/

Thank you,

Nicholas Gerasimatos

Dallas Kashuba and Josh Jones:

I am a retired Senior Deputy Labor Commissioner who was asked to return to assist in answering queries that come to the Division of Labor Standards Enforcement from the public concerning California Labor Law. One recent query had to do with alleged practices of your business. I do not know if the query originated from an ex-employee, current employee or friend of somebody who knows your business practice(s). This response is informational in hopes that your business practices do not generate future wage claims and additional liability for your business.

It is alleged that you offer both sick leave and vacation leave as benefits of employment. It is also alleged that in the case where an employee takes sick leave and does not have enough sick leave time accrued, that you deduct double the excess number of hours from that employee’s vacation leave bank. The example give was that if an employee had two hours of sick leave on the books and took a day off "sick" (a total of 8 hours) then you would deduct the two hours from the available sick leave and 12 hours vacation (double the 6 hours necessary to cover the absence). If this is a factual representation of your policies, you are incurring a great deal of liability.

Labor Code § 227.3 protects vacation hours as vested wages. The California Supreme Court in the case of Suastez v. Plastic Dress-Up (1982) [31 Cal.3d 774, 647 P.2d 122, 183 Cal.Rptr. 846] unanimously ruled that under the provisions of Labor Code § 227.3, vacations are earned day by day and any unused vacation must be paid on a pro-rata basis to the employee at the time of termination. The California Supreme Court concluded as follows:

"The right to a paid vacation, when offered in an employer’s policy or contract of employment, constitutes deferred wages for services rendered. Case law from this State and others, as well as principles of equity and justice, compel the conclusion that a proportionate right to a paid vacation vests as the labor is rendered. Once vested, "the right is protected from forfeiture by § 227.3 on termination of employment, therefore, the statute requires that an employee be paid in wages for a pro-rata share of his vacation pay."

Vacation wages, being vested as earned, cannot be taken from the employee; they must be paid. Therefore (back to the example) taking an additional 6 hours of vacation hours from the employee’s leave bank is a failure to pay for the hours that were vested. This is cumulative and affects every current and prior employee that has had excess vacation hours deducted from their leave bank. A particular quirk of the protection is that there is no violation of the statute until such time as the employment agreement is severed (termination or quit); when payment of final wages becomes due. If the illegally deducted vacation hours are not paid at the final wage rate in accordance to the applicable statue (either Labor Code §§ 201 or 202), the employee has the basis to file a wage claim against you for not only the vacation hours owed, but for penalty wages under Labor Code § 203 (for up to an additional 30 days of wages at their final wage rate).

I have advised the party that queried the Division of unlawfulness of the deduction and suggested that they have the basis of a wage claim if they were an employee of your business and had the hours deducted or would have such a claim if they were a current employee and such wages were not paid when the employment relationship ends.

Please note that business that combine sick leave and vacation leave into some form of "paid time off" or "PTO" such hours would be entitled to the same protection as vacation wages under Labor Code § 227.3. Certainly you do not owe wages to employees for work not performed; you are within your right to deduct (hour for hour) any absence from the wages owed that were not worked (time off without pay). You could deduct (hour for hour) from the vacation hours (so long as the employee is paid for these hours on their regular pay check). I would strongly suggest that such hours are reflected on the wage earning statement as something other than regular wages (either sick leave or vacation hours, as is applicable). The only issue with your policy would be any deduction of vacation hours that were not paid.

You may access the Labor Code from the left side of our web site at www.dir.ca.gov

The foregoing has been provided for informational purposes only and does not constitute legal advice. Information contained here may not be relied upon or used as an official opinion of the Division of Labor Standards Enforcement ( DLSE ) in any forum. Access to, transmission or receipt of, or reliance upon this information from the DLSE does not create, and is not intended to create, an attorney/client relationship between you or any other person and the DLSE or between you or any other person.

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